Please ensure Javascript is enabled for purposes of website accessibility

Intel's CEO Just Sold a Lot of Stock

By Ashraf Eassa – Dec 19, 2017 at 5:10PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Pay attention to these transactions.

On Nov. 29, Brian Krzanich, the CEO of chip giant Intel (INTC -2.31%), reported several transactions in Intel stock in a Form 4 filing with the SEC. 

Most of the transactions involved Krzanich exercising employee stock options (these options allowed Krzanich to purchase Intel shares at prices significantly below where they are currently trading) and then immediately selling those shares that he bought at a discount on the open market. 

Intel CEO Brian Krzanich.

Krzanich. Image source: Intel.

There's nothing wrong with, or even unusual about, such transactions. Company executives, and even some employees, often receive either stock options and/or restricted stock units (RSUs) as part of their compensation packages, and at some point, the recipients of such compensation are going to want to turn it into cash. 

Indeed, as explained here, insider selling isn't always a red flag. 

However, there were two transactions that Krzanich reported in that Form 4 filing that I thought were more notable than typical stock option exercises and subsequent share sales. Let's take a closer look. 

Krzanich is keeping the bare minimum

Intel's corporate bylaws mandate a certain amount of stock ownership by executives and board members by the time they've been with the company for five years. Here are the amounts based on rank within the company: 

Title Minimum Number of Shares
CEO 250,000
Executive chairman and president 150,000
CFO 125,000
Executive vice president 100,000
Senior vice president 65,000
Corporate vice president 35,000
Other VPs, Intel Fellows, and senior leaders 5,000-10,000

Data source: Intel. 

Since Krzanich was appointed Intel CEO in May of 2013, he'll need to have 250,000 shares by May 2018 -- or about five months from now. 

What's interesting, then, is that before Krzanich made any of the transactions that he reported in his most recently filed Form 4, he held 495,743 shares. 

After the options exercises and subsequent sales (which left Krzanich's position unchanged at 495,743 shares), Krzanich then made two more transactions: a sale of 242,830 shares and a sale of 2,913 shares, with each transaction happening at an average price of $44.555, per the filing. 

Those two transactions left Krzanich with exactly 250,000 shares -- the bare minimum that he's required to hold as CEO. 

What does this mean? 

Perhaps Krzanich sold those 245,743 shares valued at nearly $11 million at the time of the transactions to pay for a new house or buy a rare piece of artwork. 

However, I find those explanations tenuous at best, particularly in light of the big windfall that he received when he exercised and sold all those stock options. 

An Intel desktop processor.

Image source: Intel.

Instead, given that Krzanich seems to have sold all the shares he could save for those he is required by Intel's corporate bylaws to hold, the impression that I get is that Krzanich doesn't have a ton of faith in the potential for Intel stock to appreciate, perhaps driven by a lukewarm (or potentially even negative) view of the company's near- to medium-term business prospects. 

After all, considering that Intel CFO Robert Swan reportedly said in a memo seen by The Oregonian that the company aims to boost its market capitalization to $300 billion (implying a share price north of $60) by 2021, wouldn't it have been wiser for Krzanich to hold those shares, collecting about a quarter of a million dollars per year in dividend payouts, before until they gained another $16 in value each, totaling nearly $4 million in additional value? 

Indeed, considering that Krzanich claimed back in February that Intel's total addressable market is now on track to hit $220 billion by 2021, it seems strange that with all these growth opportunities ahead of Intel he'd choose to keep only the shares that he's required to by Intel's rules.

Ashraf Eassa owns shares of Intel. The Motley Fool recommends Intel. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Intel Corporation Stock Quote
Intel Corporation
INTC
$25.77 (-2.31%) $0.61

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
332%
 
S&P 500 Returns
104%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/30/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.